'Fastest Dying Cities' Meet for a Lively Talk

Wall Street Journal - DAYTON, Ohio -- Here's an idea for saving Rust Belt cities: Tell bloggers and radio stations to stop calling your town a basket case.

That was one suggestion from representatives of eight of the 10 cities labeled last year as America's fastest dying. They met at the Dayton Convention Center last weekend to swap ideas about how to halt the long skid that's turned cities like Detroit, Cleveland and Buffalo, N.Y., into shorthand for dystopia.

The city representatives lunched on $6 sloppy Joes and commiserated through Power Point strategy sessions: Lure back former residents, entice entrepreneurs and artists, convert blighted pockets into parkland.

What emerged was a sense of desperation over the difficulty of rebounding from both real problems -- declining populations, dwindling tax bases -- and perceived woes.

Valarie McCall expressed frustration at marketing a city that still echoed the image of the polluted Cuyahoga River catching fire. "That was 1969," said Ms. McCall, Cleveland's chief of governmental affairs. "Come on, I wasn't even born then."

Last year, Forbes.com used long-term trends of unemployment, population loss and economic output to devise a list of "America's Fastest Dying Cities." A few months later, Peter Benkendorf was eating chicken tacos when he hatched the idea for the symposium.http://online.wsj.com/article/SB125011106498326993.html

Inside G.E., a Little Bit of Enron

The New York Times - A decade ago, General Electric was the shining star of American business. Its longtime chief executive, Jack Welch, was named manager of the century by Fortune Magazine, and its stock seemed always to go up.

It ran a bewildering array of businesses but somehow always managed to make the expected profits. That record was viewed as proof of superior management, and the battle to succeed Mr. Welch in 2001 was watched all over the business universe. When a winner emerged, the losers quickly were hired to run other major companies.

G.E. is different now. The stock has fallen and the aura has dissipated.

This week General Electric agreed to pay $50 million to settle a suit filed by the Securities and Exchange Commission that said the company fiddled with its books repeatedly early in this decade. In at least one case, that allowed it to preserve its reputation for making the numbers. Some of the details are eerily reminiscent of Enron.http://www.nytimes.com/2009/08/07/business/07norris1.html

Sources say Forbes.com CEO stepping down

For years, Forbes.com has been the envy of the financial press, with Web traffic far surpassing that of competitors such as BusinessWeek.com and WSJ.com.

But the site's fortunes have taken a turn for the worse lately, and now someone is apparently answering for it: Jim Spanfeller, president and CEO of Forbes.com and executive vice president of electronic publishing, is stepping down, according to sources. The announcement is expected as soon as Thursday, when the company has a scheduled sales meeting.http://www.dailyfinance.com/2009/07/15/sources-say-forbes-com-ceo-stepping-down/

State Budget Woes Are Poised to Get Worse

The Wall Street Journal - State budgets look bad now, but they are set to get worse.

The bulk of funds from the federal government's stimulus package will be allocated by 2011, but tax collections aren't likely to be enough to take their place -- even if the economy is recovering.

The drop in tax revenue is set to be deeper and last longer as collections have become more sensitive to business cycles in recent years. At the same time, states face growing health-care costs and the need to replenish pension programs funded by decimated investments. And some of the stimulus funds expand programs that will require state money to sustain them after the federal largesse runs out.http://online.wsj.com/article/SB124398568837379031.html

Credit Relief May Not Last Long

The New York Times - The experience of being choked to death can concentrate a person’s attention. When the chokehold is removed, a feeling of relief, perhaps even of exhilaration, is to be expected.allowing a person to breathe may not be enough to restore him to health.

In that regard, 2009 is starting to feel a little like 1980.

Then, as in recent months, a sudden credit contraction choked off economic activity. When the credit squeeze eased, a sense of relief spread. Within a few months, consumer confidence leaped amid expectations that both employment and business conditions would soon improve.

The improvement came, but it did not last long.

When the current credit crisis was at its worst, even financially solid companies could not get short-term financing. Banks did not trust one another, and trade financing dried up. One result was a collapse in inventories, as imports sagged even more than final demand.

Now, thanks to government financing of debts as diverse as mortgages and commercial paper, credit is more readily available. That should provide a lift to orders and at least a temporary boost for countries, including China and Germany, that rely on export marketshttp://www.nytimes.com/2009/05/29/business/economy/29norris.html

Preparing to Sell E-Books, Google Takes on Amazon

The New York Times - Google appears to be throwing down the gauntlet in the e-book market.

In discussions with publishers at the annual BookExpo convention in New York over the weekend, Google signaled its intent to introduce a program by that would enable publishers to sell digital versions of their newest books direct to consumers through Google. The move would pit Google against Amazon.com, which is seeking to control the e-book market with the versions it sells for its Kindle reading device.

Google’s move is likely to be welcomed by publishers who have expressed concerns about Amazon’s aggressive pricing strategy for e-books. Amazon offers Kindle editions of most new best sellers for $9.99, far less than the typical $26 at which publishers sell new hardcovers. In early discussions, Google has said it will allow publishers to set consumer prices.

Google’s e-book retail program would be separate from the company’s settlement with authors and publishers over its book-scanning project, under which Google has scanned more than seven million volumes from several university libraries. A majority of those books are out of printhttp://www.nytimes.com/2009/06/01/technology/internet/01google.html

Low Mortgage Rates Are Going, Going…

The Wall Street Journal - If you're looking for a new 30-year mortgage, last week's events from the financial markets carry a very simple message: Get 'em cheap while you still can.

Rates on conforming 30-year loans jumped dramatically in just a few days, ending the week at an average of 5.27% according to Bankrate.com. That's still OK by historic standards, but it's a jump from the levels seen just a few weeks ago, when you could get loans at 4.75% or below.

The underlying cause isn't hard to find. Rising government debts, and burgeoning hopes of an economic recovery, are pushing up long-term interest rates on government debt. The yield on the 10-Year Treasury, which was barely 2% near the end of last year, surged to 3.67% late last week before settling back slightly. And that, in turn, pushes up rates on other long-term loans.

What does this mean for you?

This surge in mortgage rates, if it continues, is ominous news all around. It's bad for those trying to refinance an existing mortgage, those looking to buy a new home, and those looking to sell their home. It may also be bad for the stock market, and maybe even for the dollar, too. More on that later.
For those trying to refinance: If you hadn't locked in the rate already, you are probably out of luck. You may be stuck with higher rates.

Ironically, if you were stuck crawling through the refi process when the rates jumped, you may be a victim of new mortgage rules. These were introduced in the last year to prevent another subprime scandal. They have slowed down the loan approval process and have discouraged most lenders from offering rate locks until other steps have been completed. "Lenders are not locking in borrowers' rates until the (home) appraisals are in," says Paul Sapienza, broker at Drew Mortgage in Boston. Until last year you could lock in a rate while you refinanced, or even looked for a new home. "That's over," Mr Sapienza says.

For those looking to buy a new home: Be aware this rate hike -- to 5.25%, from 4.75% recently -- can add quite a bit to your expenses. It will cost an extra $50 a month for someone buying a typical $200,000 residence with an 80% loan. http://online.wsj.com/article/SB124381108186970343.html

Dollar's Woes Not Over

The Wall Street Journal - After three months of losses for the U.S. dollar against the euro, what's one more week?

Traders say the dollar, which fell to its lowest level this year on Friday, is likely to continue to trend lower this week as investors sift through a number of key data reports, as well as news from the European Central Bank policy meeting, and react to another round of Federal Reserve Treasury purchases.

The bond purchases may be the key to the dollar's performance in the first part of the week, as they could drive down yields, particularly as the Treasury won't have any note sales this week.

With market rates falling, inflation fears will come to the fore again.

Not that the dollar's chances for a bounce are nil.

"The dollar-positive scenario comes if the Fed allows a bond market selloff to undermine housing," said John Normand, a foreign-exchange analyst at J.P. Morgan Chase. "But officials are unlikely to take this gamble so early in the recovery."

Ultimately, the most vulnerable currency in the near term is the one that is most exposed to quantitative easing.

Given the Fed's commitments on asset purchases, the dollar fits the bill, which will give the euro room to advance after hitting $1.4168 Friday, a level unseen since Decemberhttp://online.wsj.com/article/SB124381671772870785.html

Fed Mortgage Efforts Prove Costly

The Wall Street Journal - The U.S. Federal Reserve's program to keep mortgage rates low by buying securities and Treasury bonds so far has been costly and seems to be having a fleeting impact.

An analysis of the timing of the Fed's purchases of mortgage-backed securities by J.P. Morgan Chase & Co. shows the Fed is "under water" on its portfolio by about 10%, and it would have to take about $5 billion in losses if it were to mark its portfolio to the market.
Since last autumn, the Fed has purchased more than $480 billion, out of an allowance of $1.25 trillion, in mortgage-backed securities and more than $130 billion, of $300 billion, in Treasury bonds to help keep mortgage rates low. Keeping rates low lets people refinance their mortgages to reduce payments and stay in their homes. It also encourages them to consider snapping up bargains in the still-ailing housing market. Many analysts believe the Fed plans to hold these securities until they mature in 10 years or so, with no plans to sell them into the market, so the losses will probably never be realized.

The central bank owns the majority of securities sold in 2009, with interest payments of 4%, 4.5% and 5%, according to J.P. Morgan's research. As interest rates rise, the value of these securities falls because new bonds are backed with higher-interest mortgage loans and thus pay higher coupons.

The Fed has spent about $2,500 per borrower, by J.P. Morgan's analysis -- more than it costs a typical mortgage borrower to refinance their debt. Higher fees and adjustments based on a borrower's credit score or home's value have been an impediment to borrowers looking to refinance a mortgage, damping the refinancing wave the Fed hoped for, analysts sayhttp://online.wsj.com/article/SB124380834210470271.html#mod=testMod

Jittery Bond Market Threatens President's Agenda

The Wall Street Journal - WASHINGTON -- Senior Obama administration officials said Friday that policy adjustments necessary to contain soaring budget deficits would be made once an economic recovery takes hold, in response to growing concerns about a run-up in long-term interest rates.

Treasury Secretary Timothy Geithner, National Economic Council chief Lawrence Summers and Office of Management and Budget director Peter Orszag said in separate interviews that the administration was acutely aware that rising interest rates pose a threat to the improving U.S. economy.
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Yields on 10-year Treasury notes have risen 1.5 percentage points this year as bond traders pull back amid worries about rising federal debt. Higher yields will leave the government with higher interest costs and still higher deficits. They could also push up other forms of interest rates, making borrowing more expensive for many people.

On Thursday, the Treasury Department is expected to announce an auction of roughly $65 billion in three-year, 10-year and 30-year notes and bonds, and the result will be closely watched.

"We're going to do what's necessary," Mr. Geithner said. "That's the only way you're going to get a strong, sustainable recovery." As soon as a recovery takes hold, the administration will reduce the deficit to a sustainable level, he said, adding, "That's difficult, but critically important."

Mr. Orszag said the administration's commitment to fiscal rectitude would become clear in coming weeks when President Barack Obama demands that any health-care plan drafted in Congress be fully paid for. That pledge, he said, "is ironclad, no ambiguity, not up for negotiation."

Additional steps on the deficit may become necessary, he added, and the administration is committed to turning to Social Security next.

"There is not a day that goes by that the president and the economic team do not focus on the long-term commitment to decrease the deficit," Mr. Summers said.

The comments by the administration officials were aimed at calming worries on Wall Street, and indicated concern that rising interest rates might imperil the president's domestic agenda, as they have done to the plans of previous Democratic administrations.

Some officials tried to play down market fears about federal borrowing. The jump in long-term interest rates, both in Treasurys and mortgages, is more a product of technical factors, they argue, than a reaction to Washington's borrowing.http://online.wsj.com/article/SB124364263595268139.html

Consumers Are Dealt a New Hand in Credit Cards

The New York Times - At first glance, the sweeping credit card legislation that passed the Senate on Tuesday looks like a huge victory for consumers. The bill, after all, contains relief from penalty fees and certain interest rate spikes.

But for people who pay off their bills each month, and milk the card rewards programs for everything they’re worth, there is some cause for concern.

For months now, the card companies have been threatening to cut rewards programs sharply to make up for revenue lost because of the new restrictions.

My guess, however, is that this talk is just so much saber-rattling.

Card companies want to make money, and big spenders help them do it, even if those cardholders do not go into debt.

First, let’s lay out the things we know will change because of the new legislation. The bill is chock-full of new rules, which will take effect at various points in the year after President Obama signs the final legislation.

¶There are new restrictions on when card companies can increase the interest rate on balances you’ve already run up. The bill says that banks generally must wait until you’re 60 days late in making the minimum payment before applying a penalty interest rate to your existing debt.

¶Card companies will have to give 45 days’ notice before raising their interest rates. There’s also a notice requirement for any significant change to a card’s terms, which may keep companies from surprising customers who have been saving their loyalty points for years with huge alterations in rewards programs.

¶Banks must send out your bill no later than 21 days before the due date. They cannot send it with, say, 14 days to go, hoping that you won’t get a check to the bank in time to avoid a late fee.

¶If the card company gets your payment by 5 p.m. on the due date, it’s on time, according to the new rules. No more of this early morning deadline nonsense, which led to late fees for payments that arrived with the afternoon mail. Also, no more late fees if the due date is a Sunday or holiday and your payment doesn’t arrive until a day later.

¶Let’s say you’re paying different interest rates on the debt on a single card — one for a cash advance, another for a balance transfer and a third for new purchases. Now, when you make a payment over the minimum balance, banks will have to apply it to the highest-interest debt first. I bet you can guess how some banks used to handle this sort of situation.

¶Banks will need your permission before allowing you the “privilege” of spending more than your credit limit and paying a fat $39 fee for that privilege. The card companies should be ashamed that they needed a law to make this “opt in” requirement a reality.

¶If you’re a student, it will become harder to get a credit card. No one under 21 can have a card unless a parent, legal guardian or spouse is the primary cardholder. Students with their own income can submit proof and ask for an exception to the co-signer requirement. http://www.nytimes.com/2009/05/20/your-money/20money.html

Credit vs. Debit: http://topics.nytimes.com/your-money/credit/credit-and-debit-cards/index.html?scp=1-spot&sq=credit%20card&st=cse

Video:http://www.nytimes.com/2009/05/20/your-money/20money.html

U.S. Expected to Own 70% of Restructured G.M.

DETROIT — In better times, many employees of General Motors called their company “Generous Motors” because of its rich benefits.

Now G.M. may stand for something else: Government Motors.

The latest plan for the troubled automaker, which is expected to file for bankruptcy by Monday, calls for the Treasury Department to receive about 70 percent of a restructured G.M.

Including the more than $20 billion that has already been spent to prop up G.M., the government will provide G.M. at least $50 billion to get the company through Chapter 11, people with direct knowledge of the situation said Tuesday. By some estimates in Detroit, tens of billions beyond that amount may be required.

The United Automobile Workers, meanwhile, will hold up to 20 percent through its retiree health care fund, and bondholders and other parties will get the remaining share. Shareholders would be virtually wiped out.

Although it has been clear for weeks that Treasury would have a majority stake of a reconstituted G.M., a 70 percent share — a figure that could still change — is higher than what had been expected. http://www.nytimes.com/2009/05/27/business/27auto.html

Stocks of Retailers Surge on Consumer Optimism

After a report showing increased consumer confidence, stocks in the U.S. rose following several days of declines. At the New York Stock Exchange on Tuesday, Glenn Pohs worked on the exchange’s options floor.

The New York Times - After several days of declines on concerns about the government’s borrowing needs and the soundness of the dollar, stock markets rebounded Tuesday on a surprising bounce in consumer confidence. The private Conference Board reported that consumer sentiment rose again in May, hitting its highest levels in eight months.

As traders returned to Wall Street after the holiday weekend, the glints of good news in those numbers were enough to outweigh other figures showing that housing prices continued to tumble as fast as ever. Every sector of the Standard & Poor’s 500-stock index was higher, led by financial stocks and consumer-geared companies like McDonald’s, the Home Depot and Lowe’s home improvement chains, and the Walt Disney Company.

The Dow Jones industrial average was up 196.17 points, or 2.37 percent, to 8,473.49, while the S.& P. 500 was 2.6 percent, or 23.33 points, higher at 910.33.

The technology-focused Nasdaq outpaced other indexes, rising 3.5 percent, or 58.42 points, to 1,750.43, on gains among computer makers, search engines and Internet firms as analysts upgraded Apple. Apple, the maker of iPhones and iPods, rose 6.8 percent to $130.78 a share.

Big banks like Goldman Sachs, Wells Fargo and JPMorgan Chase closed higher, bolstered by optimism that improving consumer sentiment could translate into stability for the financial system. Investors also edged back toward the dollar, a week after they pushed it to its lowest point in five months on concerns about inflation, the expanding supplies of new currency and big federal deficits. The dollar index, which measures the dollar’s performance against six major currencies, was up 0.1 percent.

As the dollar gained ground, gold prices fell moderately.

The jump in consumer confidence also helped the oil markets, where prices settled 78 cents higher, to $62.45 a barrel.http://www.nytimes.com/2009/05/27/business/27markets.html

Consumer Confidence Rose Sharply in May

Associated Press - A private research group said Tuesday that consumer confidence in May soared to the highest level since last September amid tentative signs that the economy was improving.

The Conference Board said that its Consumer Confidence Index, which had sharply increased in April, zoomed past economists’ expectations to 54.9, from a revised 40.8 in April.

Economists surveyed by Thomson Reuters were expecting 42.3.

The reading marks the highest in eight months, when the level was 61.4. The levels are also closer to the year-ago reading of 58.1.

The present situation index, which measures how shoppers feel now about the economy, rose to 28.9 from 25.5 last month. But the Expectations Index, which measures shoppers’ outlook over the next six months, climbed to 72.3 from 51.0 in April.

“Looking ahead, consumers are considerably less pessimistic than they were earlier this year, and expectations are that business conditions, the labor market and incomes will improve in the coming months,” Lynn Franco, director of the Conference Board Consumer Research Center, said in a statement. “While confidence is still weak by historic standards, as far as consumers are concerned, the worst is now behind us.”

The upbeat reading was good news for merchants, which are counting on consumers to be in the mood to spend, after confidence plummeted to record lows.

The Consumer Confidence survey — whose responses were received through May 19 from a representative sample of 5,000 households — showed a marked improvement in consumers’ outlook for jobs. The percentage of consumers expecting more jobs in the months ahead increased to 20.0 percent, from 14.2 percent, while those anticipating fewer jobs declined to 25.2 percent, from 32.5 percent. The proportion of consumers anticipating an increase in their incomes edged up to 10.2 percent, from 8.3 percent.http://www.nytimes.com/2009/05/27/business/economy/27consumer.html

Recession Turns Malls Into Ghost Towns

The Wall Street Journal - CHARLOTTE, N.C. -- Malls, those ubiquitous shopping meccas that sprang up in the 1950s, are dwindling in number, with many struggling properties reduced to largely vacant shells.

The long recession is helping to empty out the promenades. Some analysts estimate that the number of so-called "dead malls" -- centers debilitated by anemic sales and high vacancy rates -- will swell to more than 100 by the end of this year.

In the 12 months ended March 31, U.S. malls collectively posted a 6.5% decline in tenants' same-store sales, according to Green Street Advisors Inc., a real-estate research firm. The recent slump was led by an average 7.3% sales drop at Simon Property Group Inc., the operator with the largest number of mall locations.

The industry's woes are worsening. Thinning customer traffic, and subsequent hits to tenants' sales and profits, prompted Standard & Poor's Corp. last month to lower the credit ratings of the department-store sector. That knocked Macy's Inc. and J.C. Penney Co. into junk territory and pushed others deeper into junk. Sears Holdings Corp., a cornerstone tenant at many malls, is expected to close 23 stores this month and next.http://online.wsj.com/article/SB124294047987244803.html